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It has been almost 6 years since Apple launched the iPhone. The iPhone was priced at $499 and $599 for the 4Gb. and 8 Gb. version respectively. It was not until Apple reduced the price of the iPhone to $199 that sales increased dramatically. Essentially, Apple set a standard for the price point for future smart phone offerings.

In 2007, Samsung too had a smart phone portfolio of Windows and its proprietary OS. Most of these smart phones were QWERTY based and Samsung was trying to take share from Blackberry with it’s Blackjack device. It was the first 3G phone in the US and yours truly enjoyed the blazing fast internet speed on my Samsung Blackjack. It was not until the Summer of 2008 (a full year after the launch of the iPhone) that Samsung launched an all touch Samsung Instinct on Sprint. The phone had limited success in the marketplace. Eventually, Samsung embraced Google’s Android operating system and launched its Android portfolio in late 2009. These devices supported a QWERTY and touch interface. Like the Instinct, these devices were marginally successful.

GALAXY PROPELS SAMSUNG

Samsung’s struggled with its smartphone strategy until the launch of the Galaxy S in the summer of 2010. The Galaxy S when compared to the iPhone offered a bigger screen, a higher resolution camera and a replaceable battery. Moreover, Samsung capitalized on the success of the Galaxy S by offering 4-5 variants of the device and simultaneously launching the Galaxy on different operators.

Samsung followed the success of the Galaxy S in 2010 with wildly successful releases of the following:

2011: Samsung Galaxy S II – 4.3″ Display

Samsung Galaxy Note II – 5.3″ Display “Phablet”

2012: Samsung Galaxy S III – 4.8″ Display

Samsung Galaxy Note II- 5.5″ Display “Phablet”

2013: Samsung Galaxy S4 – 5″ Display

In January 2013, Samsung announced that they had shipped a total of 100 million Galaxy devices since launch. Moreover, Samsung has shipped numerous other models of smartphones based on the Android OS. For instance, In the UK and USA, Samsung offers 46 and 63 smartphone respectively.

APPLE STICKS TO ONE SMARTPHONE AND MAKES MAJOR DESIGN CHANGES EVERY TWO YEARS

Since launching the iPhone in 2007, Apple stuck with its mantra of “simplicity” and “elegance.” It’s smartphone’s were exactly the same across the different operators. It has made significant product design changes effectively every two years barring the redesign of the second generation iPhone 3G launched in 2008.

Apple has released the following iPhone’s:

2007: iPhone – 3.5″ Display, aluminum rear

2008: iPhone 3G – 3.5″ Display, plastic rear

2009 iPhone 3GS – 3.5″ Display, plastic rear

2010 iPhone 4 – 3.5″ Display, glass rear

2011: iPhone 4s – 3.5″ Display, glass rear

2012:iPhone 5 – 4″ Display, metal rear

Unlike Samsung, since 2008 Apple has offered the iPhone in only two colors and it only sells the current year model and the previous two years model. Moreover, in the US, Apple did not add another operator (Verizon) till 2011. However, Apple has leveraged its approach to design, iTunes ecosystem and the App store to sell roughly 250 millions iPhones to date.

Personally, I would have liked to see Apple take the same approach to its iPhone family as it took to iPod’s – offering various models to its customers. It should have started offering choices in screen sizes in 2011 and it may have had a stronger market share. There is much speculation about a “cheaper” iPhone launch later this year. It will be interesting to see how the product is perceived in the market place.

In summary, Samsung has to be congratulated for executing and delivering on its strategy with not only its Galaxy family but also its other smartphone offering – especially since it launched its portfolio three years after the iPhone was released. Apple had virtually no competition for the first three years since the launch of the iPhone. Did they get a bit complacent based on its initial success? I have to guess, “they did.” Both companies have dominant market share in the smartphone segment and have developed a loyal customer base. Various reports indicate that Samsung won the crown for market share based on unit shipments and Apple won the crown for share of profits.

A common problem facing wireless operators today is network congestion, especially in areas that have high densities of population. Mobile customers have experienced poor voice/data quality in some of these locations:

Most of us have experienced slower Internet speeds while using our smart phones, tablets and laptops. One solution to this problem is off-loading some of the traffic from the 3G/4G wireless networks to a Wi-Fi network.

I did not realize the severity of the problem that wireless carriers were facing with data congestion until I spoke with Dr. Andrew Odlyzko, Professor at the University of Minnesota and formerly the Director of its Digital Technology Center. “Carriers will have to embrace WiFi as spectrum is scarce and there is a limit to the number of cells that can be added” said Dr. Odlyzko. In 1998, as a researcher at AT&T, Dr. Odlyzko was the first person to challenge UUNET’s (part of Verizon now) overly optimistic forecast that Internet traffic was doubling every 3-4 months. Dr Odlyzko published a memorable paper estimating that Internet traffic was at best doubling every 12 months. He proved to be right.

Ruckus Wireless has developed a compelling carrier grade WiFi product by using its experience in the following products:

Residential and enterprise wireless access products.

iPTV carrier products

Wi-Fi carrier products

I have not examined either Ruckus’ or its competitors offerings in detail. However, the demand for Ruckus’ Wireless products and those offered by its competitors like Alcatel-Lucent, Belair Networks (acquisition pending by Ericsson), Cisco Systems, Nokia Siemens and others will be strong. It will be interesting to see how Ruckus competes with larger rivals in a market that not only has a limited number of customers per country but also competing with established competitors that have a broader portfolio offering. My experience tells me the company will succeed in selling its carrier product as as carriers typically have two sources for a network element.

According to Steven Glapa, Senior Director, Ruckus Wireless, “Ruckus wireless offers unparalleled adaptive antenna technology which combined with the intelligence of its gateway make its offering the best in the market.” An exuberant Mr. Glapa, added by saying.”We have the possibility of being the next generation Ericsson.”

Ruckus’ customers include:

An Australian operator

KDDI (Japan)

PCCW (Hong Kong)

Cloud, a division of BskyB

I will not be surprised in the coming months if the company announces a large operator in North America like Comcast that will enable Comcast it to offer WiFi services in high density locations that I mentioned earlier in the post.

To date, Ruckus has raised about $70 million in capital. Revenues were $100 million last year and are expected to double this year. The company was founded by Ms. Selina Lo in 2004. Previously, Ms. Lo was a founder of Centillion and AlteonWeb Systems which were acquired by Bay Networks and Nortel respectively. Coincidentally, Bay Networks was acquired by Nortel in the late nineties.

Finally, history has shown us that whether it is bits or bytes – the increased capacity in networking and computing generally gets consumed rather quickly.

Almost two years ago, Apple launched the Ipad which has sold more than 55 million units. I have bought both the versions of the iPad and have been generally pleased. The one beef that I have with the iPad is that it is a cumbersome e-reader aka book. I find the original iPad and the iPad 2 heavy and awkward reading devices.

Compared to the Samsung Galaxy Tab, the Amazon Kindle Fire and the smaller version of the Motorola Xyboard, the iPad is 25% heavier. Moreover, the devices with seven inch screens feel more like a book than the iPad. I found my reading experience on these smaller devices a lot more desirable than the iPad. These 7″ tablets are similar to the form factor of most books.

Steve Jobs maintained that the screen size of the iPad was optimal and would provide customers the best experience. However, like it does in iPod’s, I believe that Apple should offer the Ipad in a smaller versions – at least one smaller iPad. Here are the benefits to Apple:

Access to a different and a potentially larger market segment

Lower cost product should increase sales further

Complete product portfolio in the tablet category

If Apple prices an iPad mini in the range of $199-$249, I can see Apple sell at least sell 20 million units annually in addition to the iPad and increasing its revenue y $4-$5 billion annually.

Barring exceptional execution from Nokia, We believe Samsung will have the distinction of being the number one supplier of mobile devices (cell phone and smart phones). Ten years ago the company had a negligible market share compared to the likes of Nokia, Motorola and Sony. Building on its success from the Korean market, Samsung gradually penetrated other Asian markets, eventually developing a strong presence in Europe and the America’s. A couple of years ago Samsung became the number one supplier of mobile devices in the US ahead of Motorola and Nokia.

Samsung’s success can be attributed to:

Short product cycles

Excellent design

Variety of products

Lower cost products for emerging markets

Strong branding

Moreover, its success in the smartphone segment started with the Blackjack (yes! it was windows based) series. In the last copleof years the Galaxy S has achieved the distinction of being called the best android smart phone. The company has taken significant share from HTC, Motorola and some share from Apple.

Given that Google is in the process of acquiring Motorola, I will not be surprised to see Samsung offer more handsets with Windows 7/8 and its own OS.

We have heard rumors that Apple was in discussion with Verizon to launch the iPhone. However, it was only in 2011 that Verizon started offering the iPhone. It has come to my attention that Verizon’s insistence on having an icon or two offering its own services and its refusal to offer the subsidies that AT&T offered could have been the deal breaker.

I realize that AT&T had an exclusive on the iPhone as it helped with development of the first generation iPhone. However, Apple could have given some concessions to AT&T on the rebate and launched the iPhone on Verizon in 2008.

Apple has sold around 150 million phones since the launch of the iPhone. I believe the number could have been close to 200 million if Apple had started offering the iPhone on networks like Verizon that use the CDMA network. I strongly believe that the following would have happened if Apple had launched a CDMA iPhone in 2007 or early 2008:

Limited Android’s market share to less than 25%. Remember, the first Android phone, the T-Mobile G1 did not launch till October 2008. More than fifteen months after the first iPhone went on sale and three months after the iPhone 3G went on sale.

Apple’s cumulative revenues could have been $30 billion (50m X $600) higher. I am assuming the average selling price per phone of $600(conservative).

Apple’s stock would be higher than $500 as the $30 billion in lost revenue would have generated additional earnings of $6-$7 billion at the minimum.

The biggest hurdle to offering the phone for GSM and CDMA could have been getting versions of both phones produced have plagued virtually every release of the iPhone.

To be clear this post is not meant to be a rant against Apple which has executed exceptionally in the last decade. It is a simple – What if?

I am truly amazed by the results that Apple posted today. Here is a summary of unit shipments IPhone’s and IPad’s:

IPhone – 37.04 million units. A 117% increase over the previous quarter and 128% increase over the year ago quarter.

IPad – 15.43 million units. A 39% increase over the previous quarter and 111% increase over the year ago quarter.

Here is the revenue breakdown by product:

Mac Desktop:$1.94b

Mac Portables:$4.66b

iPod:$2.53b

iTunes:$2.03b

iPhone:$24.42b

iPad:$9.15b

Peripherals:$0.77b

Software, Service and other:$0.84b

It is noteworthy that 75% of Apple’s revenues come from the iPhone and the iPad. iPhone accounts for 53% of revenues and the iPad accounted for approx. 20% of revenues. The iPhone did not start shipping till June 2007 and the iPad started shipping in April 2010. Both these products account for 72% of revenues. I am not aware of any other company that is able to generate almost three-quarter’s of its revenue from products that did not exist five years ago.

Unless there is a major disruption, I can envision Apple hitting $200 billion in revenues in a couple of years. Many have opined which company would achieve a $1 trillion market capitalization. My bet is on Apple. My thesis on Apple is rather simple. In the next 3-5 years, the company will:

Achieve 15%-20% market share in desktop and portable computing. Currently, the share is around 10%.

Maintain dominant share of over 75% in tablets

It is truly impressive to note that a company that offers only five product lines (MAC, iPhone, iPad, Ipod and Itunes) is able to generate over $46 billion in revenues. If the much rumored iTV is to be released do not be surprised if Apple’s revenues increase by another $1o-$15 billion in the first year of its launch.

To help you understand the magnitude of the revenue. The $46.3 billion in Apple’s December 2011 quarter is:

Higher than Google’s entire 2011 revenue of $37.9 billion

More than double than Microsoft’s December 2011 quarterly revenues of $20.89 billion

20% more than GE’s December 2011 quarterly revenues of $37.97 billion

The formula for insanely great profits comes from insanely great products. I often wonder why other companies do not embrace Apple’s proven model of creating products that are elegant and simple.

I have been using the Samsung Charge for over a week now. This is the first LTE phone that I have used. I primarily used the phone in the Puget Sound Area and also in the San Francisco Bay Area. Here is why I like the Charge:

I prefer the Samsung Charge to the HTC Thunderbolt on Verizon because of the form factor and the ease of use. The HTC phone may have a few more bells and whistles but the Charge is newer and I know that the Charge provides faster access to Verizon’s LTE network given the history that Samsung has with Qualcomm (chip supplier and 3G/4G technology developer).

Verizon and Samsung have priced the phone at $299 with a 2 year contract. Naturally, I expect the price of the phone to drop to $199 within 3-6 months.

For the customer that need the super fast Internet connectivity that LTE offers, I recommend the Samsung Charge.